Table 20-1 Suppose the Economy of Macroland Is Described by the Following

question 132

Multiple Choice

Table 20-1
Suppose the economy of Macroland is described by the following:
C = 200 + .8DI (DI = disposable income)
I = 300 + .2Y − 50r (Y = GDP)
(r, the interest rate, is measured in percentage points.For example, a 9 percent interest rate is r = 9) .
For this economy, assume that the Federal Reserve uses its monetary policy to peg the interest rate at
r = 5
G = 750
T = .25Y
X = 200
M = 150 + .2Y
Hint: DI = Y − T
-From Table 20-1, find the budget deficit or surplus for Macroland.

• A)125.50 
• B)−93.75 
• C)−126.25 
• D)−154.75

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Definitions:

Rules

Guidelines or principles governing behavior or procedural conduct.

Behavior-Reinforcement Belief Expectancy

A concept in psychology that suggests an individual's belief in the likelihood of receiving reinforcement for a behavior influences the expectancy and motivation to perform that behavior.

Contiguity

The state of being close together in time or space, often used in psychology to describe the association between two stimuli or events.

Expectations

Beliefs or predictions about future events based on past experiences or information.